Sainsbury’s sales growth slows amid tough environment

Supermarket giant Sainsbury’s has suffered its worst trading performance in five years, hit by subdued food inflation and higher petrol prices.

Britain’s third biggest grocer said like-for-like sales in the 12 weeks to June 12 fell to their lowest level since the end of 2004, growing by 1.1 per cent excluding petrol but including higher VAT.

The firm’s trading update comes a day after rival Tesco also reported slowing sales growth of 1.1 per cent, though when the VAT change was taken into account, the market leader grew by just 0.1 per cent.

Woes: Sliding food inflation and a jump in petrol prices have had a negative effect on Sainsbury's sales growth

The outlook is poised to remain challenging for the country’s top grocers as the prospect of potential tax hikes in next week’s emergency Budget is expected to erode consumer confidence even further.

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On a positive note, Sainsbury's said it enjoyed a 'good start' to the new year, adding that trading is in line with expectations.

It noted that its strategy to open new stores had paid dividends with new sites posting better than expected results.

The group, which has eyed non-food sales and smaller convenience-style stores as key areas of growth, said that it is on track to open 1.45million square feet in new space during the current financial year.